Sky-high tobacco prices in Australia have created a lucrative black market, analysts say, sparking a violent "tobacco war" and syphoning away billions in potential tax revenue.

Faced with a pack of 25 cigarettes costing up to Aus$50 (US$32) or more -- including Aus$1.40 in tax on each stick -- many smokers have instead turned to readily available illicit tobacco.

At the same time, authorities have cracked down on vapes, restricting legal sales to pharmacies and opening up another illegal market for people in search of affordable nicotine.

In March, the government cut its budget forecast for tobacco tax revenue in the period to 2029 by Aus$6.9 billion.

"We've got a challenge here and too many people are avoiding the excise," Treasurer Jim Chalmers conceded after revealing the figures.

He announced an extra Aus$157 million for a multi-agency force battling organised crime groups involved in the market and a string of "tobacco war" fire-bombings.

The situation was a "total disaster", said James Martin, criminology course director at Deakin University in Melbourne.

"We have taken a public health issue, smoking, and our tobacco control policies have transformed it into a multi-fronted crisis," he told AFP.

"It is a fiscal crisis, so we are losing billions and billions of dollars in tobacco........

© International Business Times